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INSIGHT - If We Build It, Can They Launch It?
by Robert Bell, Executive Director
Society of Satellite Professionals International

Several months ago, I had the opportunity to talk with Tom Moore, Senior Vice President of ViaSat and President of the recently announced ViaSat-1 Ka-band broadband satellite initiative. As one of two founders of WildBlue Communications, Moore carved a name for himself as a true pioneer of satellite broadband services. When he started talking about the relevance of satellites in meeting unserved or underserved markets and meeting the voracious appetite for consumer satellite applications, I took immediate notice.

ViaSat calculates there are approximately 12 to 15 million unserved broadband households in the United States and another 10 to 20 million underserved homes. According to Moore, “The success of satellite broadband in the U.S. today shows that satellite is a very viable alternative for this unserved and underserved population.”

In response, ViaSat is launching ViaSat-1, which according to Moore, will be “the highest capacity satellite ever built by an order of magnitude.” ViaSat-1 will be able to support far more subscribers at lower cost and the technology will bring customers a far better user experience by providing the more abundant bandwidth.

Moore and the ViaSat team aren’t alone in expressing excitement in launching new projects. During Euroconsult’s World Satellite Business Week, held September 8th through 11th in Paris, several CEOs, including major satellite operators, echoed the need to expand offerings into unserved or underserved areas.

A Building Boom?
With a 12 to 15 year life expectancy, it was not unheard of for satellites to take up to 7 years to reach 70-80 percent capacity. These days, however, many satellites are being launched with anxious customers waiting to flip the switch as soon as the satellite is pronounced operational. It’s not a huge stretch to conclude that building and launching even more satellites would provide additional capacity and additional revenues.

According to Euroconsult, over 80 geosynchronous satellites and 48 Low Earth Orbit satellites are in the pipeline to be built and launched in the next few years. Eutelsat, for example, announced during World Satellite Business Week that it had 7 satellites to be delivered between the 2010-2011 timeframe. In addition, with service providers looking to expand into new and exciting markets, that number could continue to grow.

However, according to a Futron study published by the Satellite Industry Association in June, only 21 new commercial satellite orders were announced in 2007, four fewer than the year before. One possible reason voiced during World Satellite Business Week was the skyrocketing cost of securing a launch.

The Costly Ride to Space
There was a time not so long ago when the industry was faced with launcher over capacity. A ride to space could be secured within a reasonable time frame and at costs that didn’t break the bank. Today, however, the tables have been turned, with launch slots coming at a premium and being booked far in advance.

According to reports out of World Satellite Business Week, prices have escalated to the point of placing some projects in serious jeopardy. Giuliano Berretta, CEO of Eutelsat, was quoted as saying, “Some have paid $120 million for a Proton. It is another world.” Dan Goldberg, CEO of Telesat agreed that the costs were beginning to impact decisions on moving projects forward.

Cost has always been an issue debated in the launch industry. Rides to space don’t come inexpensively. The increasing costs are getting more difficult to swallow, especially when reliability is in question.

A recent spate of launch failures has raised concerns that pricing isn’t reflecting quality. Launch providers are responding with stepped up campaigns to ensure quality assurance, but the satellite industry and the insurance community are notoriously skittish. Nervous insurers mean higher rates leading to yet more cost constraints on projects already struggling to secure funding.

A Snapshot of the Launch Industry
The Futron/SIA report reveals that 102 satellites were launched in 2007, with 49 of those commercial launches. That’s an increase from 2006, but not by much. Revenues for the launch industry also increased in 2007, reversing a 10 percent decline the previous year.

2007, however, also witnessed two launch failures — one for Sea Launch’s Zenit vehicle, and one by the Proton rocket under International Launch Services.

Those failures left Sea Launch grounded for the entire year while Proton resumed flight after two months (a different configuration Proton K/Block DM was launched in the interim for a Russian government mission carried out by a Russian Space Forces launch crew).

As of the beginning of September, Sea Launch had completed four successful launches and had one more scheduled, while Land Launch had one successful flight and one campaign underway. ILS had two successful launches and one failure, with another 2 missions scheduled before closing out the year. Arianespace had completed five successful Ariane 5 missions and one Soyuz mission, with an additional four Ariane 5 launches scheduled. Lockheed Martin Commercial Launch Services had one Atlas 5 mission in 2008.

Launch Pad Gridlock
Speaking volumes about what’s to come for operators looking to expand their fleet of satellites are the backlogs. At the start of 2008, ILS issued a release stating they had a total backlog of 22 firm launches through 2013. Since then, they’ve announced four more contracts, totaling five additional launches. The Arianespace backlog includes 24 geostationary satellites using either Ariane 5 or Soyuz, 10 government launches aboard Ariane 5, and an additional 7 dedicated Soyuz launches.

The days of securing a close-in launch slot are all but over. Larger operators, such as SES, are taking drastic steps to ensure a ride when they need one. In June 2007, SES Global signed a groundbreaking contract with Arianespace and ILS that, according to the press release, would cover “the majority of the satellite launch requirements for the SES group from the period 2009-2013.” The multi-launch agreement ensures each SES satellite has a primary as well as a back-up launch vehicle, each with two launch slots.

That level of flexibility is not for everyone. For the smaller operators, securing such contracts is likely out of their financial realm. For service providers looking to gain more capacity, availability may be harder to locate.

The premise is straightforward — you need the satellite in orbit to generate revenue and the launch vehicle to place that satellite into orbit. Without an adequate fleet of launch vehicles available at costs that the majority of operators can afford, the innovative services that have made satellites so indispensable in our daily lives may become the victim of a major traffic jam.

Different Ending to an Old Story?
This is, of course, an old story. The industry has long lived with cycles of boom and bust. In one part of the cycle, launch companies increase capacity and raise prices to handle strong demand from satellite carriers, only to be stuck with excess capacity when demand for new birds drops in an economic downturn. Sharp price-cutting quickly follows.

In this context, it is interesting to consider another part of the ViaSat vision as described by Tom Moore. Given huge pent-up demand for broadband and the emerging ability of satellites to meet it at a competitive price, Moore believes that tomorrow’s broadband satellites will take only 1 to 3 years to fill, instead of the 5, 7 or more years in today’s business plans. With payback so much sooner, carriers will probably seek to loft more birds, putting further strain on launch capacity.

No one should forget the launch business itself is facing the potential for disruptive change. In April, NASA awarded Elon Musk’s SpaceX an indefinite delivery, indefinite quantity contract worth anywhere between US$20,000 and US$1 billion for launches starting in 2010. On September 9th, SpaceX was granted an operational license by the U.S. Air Force for the use of Launch Complex 40 at Cape Canaveral, paving the way for SpaceX to start Falcon 9 launch operations later this year.

Musk is another pioneer seeking to change the rules of the game. If he is successful, his Falcon rockets could sharply undercut current pricing for launches. This would present today’s launch companies with trouble they have not yet experienced.

If you were seeking a quiet life, this may not be the best of times to be working as a satellite professional.

But, hey, what’s so great about a quiet life anyway?

About the author
Robert Bell is the Executive Director of the Society of Satellite Professionals International. Robert has authored articles in numerous industry publications and has appeared in segments of ABC World News and The Discovery Channel. He is a frequent speaker and moderator at industry conferences including SATELLITE, NAB, SATCON, and Sportel. He is also the author of the World Teleport Association’s Teleport Benchmarks and Sizing the Teleport Market research studies; and of B2B Without the BS, a guide to sales and marketing in the business-to-business sector available from Amazon.com.